Published: Sun, May 06, 2018
Business | By Pearl Harrison

HSBC to buyback shares as profits fall

HSBC to buyback shares as profits fall

John Flint has made a shaky start to his tenure as HSBC chief executive after costs rose faster than expected in the first quarter, overshadowing a $2 billion (€1.67 billion) share buyback and sending the bank's stock down as much as 2.7 per cent in Hong Kong.

He stated that the financial institution's "major focus is to develop the companies safely, and now we have elevated funding to ship that goal".

Reported operating expenses climbed 13 per cent year-on-year to $9.4bn, thanks to costs related to the bank's expansion and the provision for the expected USA settlement.

Adjusted pre-tax profit fell 2.9 per cent to US$6.03 billion, matching a consensus estimate of US$6 billion, while the adjusted revenue was US$13.9 billion.

The results underscore the strong hand dealt to Flint, who has taken the Asia-focused lender back into expansion mode after years of restructuring, when it lost tens of billions of dollars in revenue and suffered misconduct fines. Mr Flint said the 8 per cent rise in underlying quarterly costs reflected investments in its Chinese and United Kingdom retail banking operations, its Chinese securities joint venture and digital improvements across the group.

But, it added: "Given the growth opportunities we now see, we expect this to be the only share buyback that we announce in 2018". It also made what it called "strategic hires" in its onshore Chinese securities venture, and invested to improve the digital capabilities in all global businesses. Hong Kong was a major contributor to the positive figures in the unit.

Hong Kong shares of HSBC extended their losses yesterday after the results, ending 3.5 per cent down at HK$74.95. HSBC seeks to make it its gateway to the world's second-largest economy.

HSBC made three-quarters of its profits in Asia previous year.

Flint said on Friday the bank would not look to acquire a domestic business in the United States to increase its scale there, contrary to media reports earlier this year.

HSBC's common equity tier 1 ratio - a measure of financial strength - was 14.5 percent at the end of March, flat compared to end-December and higher than 14.3 percent in the first quarter of 2017.

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